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Financial systems and the role of banks in monetary policy transmission in the euro area

  • Sevestre, Patrick
  • Martinez-Pages, Jorge
  • Gambacorta, Leonardo
  • Ehrmann, Michael
  • Worms, Andreas

This paper offers a comprehensive comparison of the structure of banking and financial markets in the euro area. Based on this, several hypotheses about the role of banks in monetary policy transmission are developed. Many of the predictions that have been proposed for the U.S. are deemed unlikely to apply in Europe. Testing these hypotheses we find that monetary policy does alter bank loan supply, with the effects most dependent on the liquidity of individual banks. Unlike in the US, the size of a bank does generally not explain its lending reaction. We also show that the standard publicly available database, BankScope, obscures the heterogeneity across banks. Indeed, for several types of questions BankScope data suggest very different answers than more complete data that reside at national central banks.

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Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2001,18.

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Date of creation: 2001
Date of revision:
Handle: RePEc:zbw:bubdp1:4163
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  1. Hernando, Ignacio & Martinéz Pagés, Jorge, 2001. "Is there a bank lending channel of monetary policy in Spain?," Working Paper Series 0099, European Central Bank.
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  9. Loupias, Claire & Savignac, Frédérique & Sevestre, Patrick, 2001. "Monetary policy and bank lending in France: are there asymmetries?," Working Paper Series 0101, European Central Bank.
  10. Ben S. Bernanke & Alan S. Blinder, 1988. "Credit, Money, and Aggregate Demand," NBER Working Papers 2534, National Bureau of Economic Research, Inc.
  11. Stephen G. Cecchetti, 1999. "Legal Structure, Financial Structure, and the Monetary Policy Transmission Mechanism," NBER Working Papers 7151, National Bureau of Economic Research, Inc.
  12. Favero, Carlo A. & Flabbi, Luca & Giavazzi, Francesco, 1999. "The Transmission Mechanism of Monetary Policy in Europe: Evidence from Banks' Balance Sheets," CEPR Discussion Papers 2303, C.E.P.R. Discussion Papers.
  13. G.J. de Bondt & A.C.J. Stokman, 2000. "The importance of financial structure for monetary transmission in Europe," WO Research Memoranda (discontinued) 616, Netherlands Central Bank, Research Department.
  14. Gambacorta, Leonardo, 2003. "Asymmetric bank lending channels and ECB monetary policy," Economic Modelling, Elsevier, vol. 20(1), pages 25-46, January.
  15. Rafael La Porta & Florencio Lopezde-Silanes & Andrei Shleifer, 2000. "Government Ownership of Banks," NBER Working Papers 7620, National Bureau of Economic Research, Inc.
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  17. Luísa Farinha & Carlos Robalo Marques, 2002. "The bank lending channel of monetary policy: identification and estimation using Portuguese micro bank data," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 A4-3, International Conferences on Panel Data.
  18. Ehrmann, Michael & Worms, Andreas, 2001. "Interbank lending and monetary policy transmission - evidence for Germany," Working Paper Series 0073, European Central Bank.
  19. Worms, Andreas, 2001. "The reaction of bank lending to monetary policy measures in Germany," Working Paper Series 0096, European Central Bank.
  20. Anil K Kashyap & Jeremy C. Stein, 1994. "The Impact of Monetary Policy on Bank Balance Sheets," NBER Working Papers 4821, National Bureau of Economic Research, Inc.
  21. Jeremy C. Stein & Anil K. Kashyap, 2000. "What Do a Million Observations on Banks Say about the Transmission of Monetary Policy?," American Economic Review, American Economic Association, vol. 90(3), pages 407-428, June.
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  23. Corvoisier, Sandrine & Gropp, Reint, 2001. "Bank Concentration and Retail Interest Rates," Working Paper Series 0072, European Central Bank.
  24. Luca Sala, 2002. "Monetary Transmission in the Euro Area: A Factor Model Approach," Macroeconomics 0205005, EconWPA, revised 15 May 2002.
  25. Ignacio Hernando & Jorge Martínez Pagés, 2001. "Is There a Bank Lending Channel of Monetary Policy in Spain?," Banco de Espa�a Working Papers 0117, Banco de Espa�a.
  26. Skander Van den Heuvel, 2006. "The Bank Capital Channel of Monetary Policy," 2006 Meeting Papers 512, Society for Economic Dynamics.
  27. Brissimis, Sophocles N. & Kamberoglou, Nicos C. & Simigiannis, George T., 2001. "Is there a bank lending channel of monetary policy in Greece? Evidence from bank level data," Working Paper Series 0104, European Central Bank.
  28. Topi, Jukka & Vilmunen, Jouko, 2001. "Transmission of monetary policy shocks in Finland: evidence from bank level data on loans," Working Paper Series 0100, European Central Bank.
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